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Interesting article I found surfing..

Sandhusker

Well-known member
ROSENTHAL COLLINS FUTURES
30 S. Wacker, Ste. 1213, Chicago, Illinois
800-624-6572

(December 3, 1999) CATTLE: "VIEW FROM THE PIT"--We ended last week with a solid $71.00 live cattle trade and a boxed beet price for lightweight choice at $119.55. The picture appears to have gotten considerably more muddled this week, however, as we see that as of today (Wednesday PM) there has been no cash cattle trade in Texas or Kansas. On the other hand, Nebraska is showing over 60,000 head traded for the week with a top of 372.00 live or $114.00 in the beef. Despite this activity in Nebraska the bids in Texas and Kansas are $69.00 while offers are 371.00 and $72.00. I think it is also worth mentioning that Nebraska sells far fewer cattle on contract or formula than Texas or Kansas. Volume for the first 3 days of this week in Texas is 33,900 head with 33,800 as unpriced formula or contract sales while Kansas is showing volume of 42,800 head with 41,700 on formula or contract. Hmmm, I wonder what the price of those Texas and Kansas cattle would have been if somebody had to compete in the market to buy them?
The past 3 weeks have been extremely interesting In both the live market and the futures with the two of them not necessarily corresponding with each other. For example, on November we saw a cash cattle trade that week at $70.00 with a boxed beef trade on lightweight choice at $114.87. As of last week we put almost $5.00 on the beef price while only putting $1.00 on the live cattle price. December and February futures both rallied about 200 points from $69.00 to $71.00 before selling off sharply this week to close today near the monthly low prices of $69.57 and $69.22. in my opinion this recent weakness in the futures is the result of three main factors: (e) Extremely high open interest in the December futures contract. Since a high portion of the long positions are held by funds that must liquidate before deliveries can occur, and a high portion of the short positions are held by hedgers that remain until they market their cattle, it is not unusual to see pressure on the market during the month before deliveries. (b) An announcement earlier this weak that Mexico has decertified 17 packing plants (11 beef) for imports into Mexico. At this time the particulars remain vague on this issue, but it still leaves the door open for plants other than those listed to export product. (c) A great deal of rumor/talk about how the recent increase in beef demand was radically overdone with wild expectations for millennium business that is not happening. Rumors are that much of the advanced buying is being canceled and that will leave an excess of boxed beef. My response to that is simply if that were totally true why are we seeing cattle slaughter for the first 3 days of this week at 390.000 versus 374,000 last year.

While each of the above points are valid, I continue to believe that the increase in beef demand represents far more than Y2K. I believe it represents a major change in eating habits based on high protein. For instance the increase in beef demand began long before any of the Y2K buying began. Further proof of this can be easily seen statistically when we see that from April through October beef production increased about 3% over last year, while the boxed beef cut-out value increased 14%.

Per the November Cattle on Feed report, this report shows 6% more cattle in the feedlots with an increase in October placements of 9%. Note that this report showed 9% less cattle placed over 700 pounds while placements of calves under 700 pounds ran almost 30% higher This is the same pattern we have seen for the past 90 days and tells me that the vast majority of these cattle will not be finished cattle before May or June. I expect to see a continuation of the strong beef demand that will keep packers buying cattle and keep us current. We recently rallied our live cattle market about $5.00 during a period showing about a 3% increase in beef production. I expect the reduction in placements of yearlings plus the retention of heifers to create a tightness in finished cattle resulting in about a 3% reduction in beef production for the first half of 2000. I believe that this will bring us to a $75.00 futures market by April and maybe sooner. My recommendation remains to buy December, February, and April live cattle futures for a 500-point ($2.000.00) per contract move higher.

As explained above, while I am extremely bullish the above futures I believe the bulk of the calves that have been placed during the last 90 days will become finished cattle in the May-July period. For this reason I am now making a major spread recommendation, long February-short June cattle. This spread closed today with February 27 over June and I believe we could eventually see February 250 to 300 premium for a potential profit of $1,000.00 per spread on a $300.00 per spread margin.

For the past 5 years, in virtually every market letter I have written, I have strongly voiced my opinion about how the most negative aspect of the cattle industry is the selfish, self-destructive, marketing methods of selling cattle on a formula or contract, i.e., captive supply. Further evidence of the packer benefits of this practice were seen recently in Iowa as talk of an Excel plant being built brought IBP to the forefront trying to sign many more producers to formula deals. Why is it so difficult to see that this practice depresses the market and damages your neighbors. It helps only the packer and if this were not the case, he wouldn't offer it.
At the present time there are a few things occurring that could lead towards a reduction of packer price control. (a) Mandatory price reporting (b) Government investigation of corporate buy-outs and mergers (Smithfield and Murphy Farms). (c) Class action lawsuit against IBP for price manipulation. (d) Texas Cattle Feeders endorsement of a co-operative marketing plan. I believe these are all issues that are anti-captive supply and deserve any extra support you can give them. The most dangerous situation we are now facing is that cattle feeding is now in the middle of the best profits we have seen in many years and this has a tendency to cause many of us to forget about previous losses. This can and will prove to be extremely short-sighted as the price of feeders have Increased substantially, we remain at risk of severe weather, we remain subject to the possibility of increased feed cost. As you know, I remain very optimistic on the live cattle market for next year, however, the shame of it is that even if the higher prices happen, they will be substantially less than they belong because of the control we have turned over to the packer.

The entire cattle feeding industry is now hearing a great deal of talk about how packers do not expect to be able to hold the beef prices up and this will severely destroy their profit margins if they continue to pay over $70.00 for live cattle. This becomes even more interesting considering that almost every major packer is showing record yearly profits. The main producer problem remains our loss of our share of the total retail beef dollar, but I am now going to concern myself only with the producers share of the wholesale beef dollar (boxed beef).
In past letters I have repeatedly pointed out that the major emergence of captive supply power first showed up in March of 1994 when the worlds largest packer pulled out of the cash cattle market, worked almost totally off of formula cattle, and broke the market from $77.00 to $62.00 in about 10 weeks. It now appears that through the use of captive supply we have seen a second round of extreme power which began in mid-summer of 1998. Since 1992 we had seen the live cattle market average very close to 64% of the price of lightweight choice boxed beef. This underwent a radical change in mid-1998 and we have never recovered. On August3l, 1998 we had a boxed beef price of $102.55 with a live cattle price of $57.00 giving us a percentage of 55%. If we had received the 64% average price of the past 6 years the live cattle price would have been $65.60 or about $100.00 per head higher. Even today, while we appear to be dangerously happy with our $71.00 live cattle market, we must recognize that with a boxed beef trade of $119.50 we are still receiving under 60% of the boxed beef price. That 4% difference that is now going directly to the packer equates to about $62.00 per head. Remember these numbers the next time you hear or read about how the packer must cut back slaughter to regain his lost profit margin.Volatility in the futures means entry opportunities. Live cattle and beef information coupled with trading pit knowledge puts the chips on your side. Stay in contact. Stay current. Keep selling cash cattle on the open market.
 

Jason

Well-known member
Using a % of boxed beef values to determine fairness is just a lame viariation on retail price %.

Have costs risen since 1998?

Have boxed beef prices increased at exactly the same ratio as those expenses?
 

Sandhusker

Well-known member
Jason said:
Using a % of boxed beef values to determine fairness is just a lame viariation on retail price %.

Have costs risen since 1998?

Have boxed beef prices increased at exactly the same ratio as those expenses?

Costs have risen for everybody, Jason.
 

Jason

Well-known member
Sandhusker said:
Jason said:
Using a % of boxed beef values to determine fairness is just a lame viariation on retail price %.

Have costs risen since 1998?

Have boxed beef prices increased at exactly the same ratio as those expenses?

Costs have risen for everybody, Jason.

I'm glad you acknowledge that Sandhusker. Now if you are a margin operator and your costs go up faster than your receipts, what happens to your bottom line?
 

Sandhusker

Well-known member
Jason said:
Sandhusker said:
Jason said:
Using a % of boxed beef values to determine fairness is just a lame viariation on retail price %.

Have costs risen since 1998?

Have boxed beef prices increased at exactly the same ratio as those expenses?

Costs have risen for everybody, Jason.

I'm glad you acknowledge that Sandhusker. Now if you are a margin operator and your costs go up faster than your receipts, what happens to your bottom line?

Are producers to just eat their increasing costs? I don't understand your "poor margin operating packers, their expenses went up", while you ignore costs for the producers - especially when you consider that the packers have considerably more control over both their income and expenses.
 

Jason

Well-known member
If you are a commodity producer (like cattle) you have little control over the ultimate price of your product. Knowing this and using tools available to reduce your exposure are good business. Complaining about how rotten it is to be a rancher doesn't serve anyone well.

Ranchers have increased production per cow, per acre and per rancher. Most haven't just eaten the rising costs.

The things a rancher can control, the genetics he/she uses to get the best product (beef). The handling of the cattle, calm cattle make better beef. Careful use of medicines and injection sites. Who wants a needle scar in their steak?

Reality is what it is. A commodity producer has to react to market signals. If you don't like that find a line of work where you get paid no matter what your performance is. Like banking...oh wait I guess some already are :lol: :lol: :lol: :lol:
 

Sandhusker

Well-known member
I agree that there are things a producer can do to squeeze more production from his place, but a pasture will take only so many cows. A cow will wean only so big a calf. You consider equipment costs, taxes, fuel etc...., and I'll argue that these costs are not being offset by BQA.

The facts remain, everybody's costs are going up, but the rancher's piece of the pie has shrunk.
 

agman

Well-known member
Sandhusker said:
Jason said:
Sandhusker said:
Costs have risen for everybody, Jason.

I'm glad you acknowledge that Sandhusker. Now if you are a margin operator and your costs go up faster than your receipts, what happens to your bottom line?

Are producers to just eat their increasing costs? I don't understand your "poor margin operating packers, their expenses went up", while you ignore costs for the producers - especially when you consider that the packers have considerably more control over both their income and expenses.

In all due respect to the person who wrote the article, since he has just recently passed away, his analysis as always is always short of all the facts. For the one period he cites that the live to wholesale margin decreased their are offsetting times where it was just the opposite. The data he cites is both cyclical and seasonal, a fact overlooked in his haste to accuse packers of wrongdoing.

He can also be credited for convincing some, who were as misinformed as he was, that IBP pulled out of the market in the spring of 1994 for many weeks causing prices to decline. I served on a panel with him when he made the aforemetnioned accusation, I remember it well. That observation and assumption was proven dead wrong in data subpoenaed by the plaintiffs in the Pickett case which showed that IBP did not withdraw at all during the claimed period but in fact bought more cattle than normal in the cash market during said period. So much for facts versus false observations and false assumptions.
 

agman

Well-known member
Sandhusker said:
I agree that there are things a producer can do to squeeze more production from his place, but a pasture will take only so many cows. A cow will wean only so big a calf. You consider equipment costs, taxes, fuel etc...., and I'll argue that these costs are not being offset by BQA.

The facts remain, everybody's costs are going up, but the rancher's piece of the pie has shrunk.

How do you measure the pie?
 

Econ101

Well-known member
agman said:
Sandhusker said:
Jason said:
I'm glad you acknowledge that Sandhusker. Now if you are a margin operator and your costs go up faster than your receipts, what happens to your bottom line?

Are producers to just eat their increasing costs? I don't understand your "poor margin operating packers, their expenses went up", while you ignore costs for the producers - especially when you consider that the packers have considerably more control over both their income and expenses.

In all due respect to the person who wrote the article, since he has just recently passed away, his analysis as always is always short of all the facts. For the one period he cites that the live to wholesale margin decreased their are offsetting times where it was just the opposite. The data he cites is both cyclical and seasonal, a fact overlooked in his haste to accuse packers of wrongdoing.

He can also be credited for convincing some, who were as misinformed as he was, that IBP pulled out of the market in the spring of 1994 for many weeks causing prices to decline. I served on a panel with him when he made the aforemetnioned accusation, I remember it well. That observation and assumption was proven dead wrong in data subpoenaed by the plaintiffs in the Pickett case which showed that IBP did not withdraw at all during the claimed period but in fact bought more cattle than normal in the cash market during said period. So much for facts versus false observations and false assumptions.

Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?
 

agman

Well-known member
Econ101 said:
agman said:
Sandhusker said:
Are producers to just eat their increasing costs? I don't understand your "poor margin operating packers, their expenses went up", while you ignore costs for the producers - especially when you consider that the packers have considerably more control over both their income and expenses.

In all due respect to the person who wrote the article, since he has just recently passed away, his analysis as always is always short of all the facts. For the one period he cites that the live to wholesale margin decreased their are offsetting times where it was just the opposite. The data he cites is both cyclical and seasonal, a fact overlooked in his haste to accuse packers of wrongdoing.

He can also be credited for convincing some, who were as misinformed as he was, that IBP pulled out of the market in the spring of 1994 for many weeks causing prices to decline. I served on a panel with him when he made the aforemetnioned accusation, I remember it well. That observation and assumption was proven dead wrong in data subpoenaed by the plaintiffs in the Pickett case which showed that IBP did not withdraw at all during the claimed period but in fact bought more cattle than normal in the cash market during said period. So much for facts versus false observations and false assumptions.

Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?

Once again you have no facts to dispute my statement so you make another baseless assumption. You seem in your hate and haste to blame packers overlooked that the aforementioned claims were proved dead wrong by subpoenaed purchase records. Where is your evidence to prove otherwise?

You are just a wannabe and nothing more. No one believes what you have to say anyway. Your coffee break is over so go back to your shift at 7-11 and hallucinate some more.
 

Econ101

Well-known member
agman said:
Econ101 said:
agman said:
In all due respect to the person who wrote the article, since he has just recently passed away, his analysis as always is always short of all the facts. For the one period he cites that the live to wholesale margin decreased their are offsetting times where it was just the opposite. The data he cites is both cyclical and seasonal, a fact overlooked in his haste to accuse packers of wrongdoing.

He can also be credited for convincing some, who were as misinformed as he was, that IBP pulled out of the market in the spring of 1994 for many weeks causing prices to decline. I served on a panel with him when he made the aforemetnioned accusation, I remember it well. That observation and assumption was proven dead wrong in data subpoenaed by the plaintiffs in the Pickett case which showed that IBP did not withdraw at all during the claimed period but in fact bought more cattle than normal in the cash market during said period. So much for facts versus false observations and false assumptions.

Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?

Once again you have no facts to dispute my statement so you make another baseless assumption. You seem in your hate and haste to blame packers overlooked that the aforementioned claims were proved dead wrong by subpoenaed purchase records. Where is your evidence to prove otherwise?

You are just a wannabe and nothing more. No one believes what you have to say anyway. Your coffee break is over so go back to your shift at 7-11 and hallucinate some more.


Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?
 

agman

Well-known member
Econ101 said:
agman said:
Econ101 said:
Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?

Once again you have no facts to dispute my statement so you make another baseless assumption. You seem in your hate and haste to blame packers overlooked that the aforementioned claims were proved dead wrong by subpoenaed purchase records. Where is your evidence to prove otherwise?

You are just a wannabe and nothing more. No one believes what you have to say anyway. Your coffee break is over so go back to your shift at 7-11 and hallucinate some more.


Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?

Assumptions and accusations are not proof of any illegality. No proof has been provided that marketing agreements are or were being used illegally.

Why do you dismiss facts over false and baseless allegations? That is the issue, not whether one is pro or anti packer. If packers screw up I will know it long before you ever figure it out. You are dead wrong if you think I would not blow the whistle.

Your new coined phrase "why are you against producers" shows once again how little you truly know. That phrase has no merit like most of the comments you make. Real producers, not blamers, know how much I do for them and this great industry. I work with forward thinking producers everyday, all day. I never have turned anyone down at any level who has asked for assistance and I have no intention of doing so in the future. I don't waste my time on blamers as I have yet to find one who is actually a true leader and is moving this industry forward. Demagoguery does serve nor move this industry forward, rather it is deceptive, lacks substance, lacks solutions and is backward thinking.
 

Econ101

Well-known member
agman said:
Econ101 said:
agman said:
Once again you have no facts to dispute my statement so you make another baseless assumption. You seem in your hate and haste to blame packers overlooked that the aforementioned claims were proved dead wrong by subpoenaed purchase records. Where is your evidence to prove otherwise?

You are just a wannabe and nothing more. No one believes what you have to say anyway. Your coffee break is over so go back to your shift at 7-11 and hallucinate some more.


Agman, you were dead wrong that marketing agreements having a legal purpose excludes their ability to being used in an illegal manner. Guns don't kill people, people kill people. Don't you remember the discussion?

Why are you always against producers?

Assumptions and accusations are not proof of any illegality. No proof has been provided that marketing agreements are or were being used illegally.

Why do you dismiss facts over false and baseless allegations? That is the issue, not whether one is pro or anti packer. If packers screw up I will know it long before you ever figure it out. You are dead wrong if you think I would not blow the whistle.

Your new coined phrase "why are you against producers" shows once again how little you truly know. That phrase has no merit like most of the comments you make. Real producers, not blamers, know how much I do for them and this great industry. I work with forward thinking producers everyday, all day. I never have turned anyone down at any level who has asked for assistance and I have no intention of doing so in the future. I don't waste my time on blamers as I have yet to find one who is actually a true leader and is moving this industry forward. Demagoguery does serve nor move this industry forward, rather it is deceptive, lacks substance, lacks solutions and is backward thinking.

The jury thought different, Agman. You are the one with the theory that just because marketing agreements have legal purposes it rules out all illegal use. Such a lame theory. Yes, it was very concerning that Tyson was able to convince the 11th circuit of such nonsense. It was concerning that the 11th circuit knows so little about economics that they made an erroneous example out of the Robinson Patman Act and then stated that there may have been daubert issues on Taylor. It shows what a sham it all was.

You are all for producers who participate in your market manipulation schemes, at the expense of the market as a whole.

You want to move this market into the same structure that Tyson has their poultry growers in, where there is no other choice and complete market power rules the day. It is not progress--change, yes, but not progress. It is REGRESSION from free markets and domination of our food supply in the hands of a few.

Where are your "facts"?
 

Sandhusker

Well-known member
Agman, " No proof has been provided that marketing agreements are or were being used illegally."

Maybe you should review Judge Strom's comments. What does "evidence was presented to support the jury's decision" mean to you?
 

RobertMac

Well-known member
Agman, with Judge Strom overturning the jury verdict, it does come of as a sham! Why couldn't the appeal been made with the jury verdict standing?

Producers have the ability to control their destiny and effect the market place, but they have got to stay involved past weaning or the feedlot...particularly by supporting producer connected/run branded programs that support the small and medium size packers. These packers are our connection to the consumer...without them, we are at the mercy of those connected to the consumer. All dollars come from the consumer!
 
A

Anonymous

Guest
Sandbag: "Maybe you should review Judge Strom's comments. What does "evidence was presented to support the jury's decision" mean to you?"

It means ibp dropped their price in the cash market as their needs were filled in the formula market. SO WHAT? Order buyers at the sale barn drop their price as their needs are filled too. Producers drop the price they are willing to pay for bulls as their needs are filled too.

Besides, ibp/Tyson is not "THE MARKET", ibp/Tyson is "A MARKET" within "THE MARKET". If ibp drops their price, SELL TO EXCEL.

You thumbsucking packer blamers make me sick.

We just saw the highest feeder cattle prices ever recorded. DID CAPTIVE SUPPLY LEVELS CHANGE????? HELL NO!

Another baseless packer blaming conspiracy theory shot to hell by the facts.

Watch what happens in Aberdeen skippy! The packer blamers are about to lose another court case.


~SH~
 

ranch hand

Well-known member
Producers drop the price they are willing to pay for bulls as their needs are filled too.

How does that work? If I have 20 bulls to buy I can't drop the price on the last 5 and still get the ones I want.
 

Sandhusker

Well-known member
ranch hand said:
Producers drop the price they are willing to pay for bulls as their needs are filled too.

How does that work? If I have 20 bulls to buy I can't drop the price on the last 5 and still get the ones I want.

Now, now, Ranchhand, you're only trying to confuse the issue with logic and common sense. :wink:
 
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